Republican Views On Banking Regulation

When it comes to finance and banking, the term “high risk activities” comes to mind: it’s what both parties are looking for to make a profit when they enter into these deals. That just about sums up the Republican views on bank regulation. The party urges the immediate repeal of Dodd-Frank, often referred to as a “legislative Godzilla” loaded with “excessive regulation and burdensome requirements.”

The Consumer Financial Protection Bureau is good at its job, yet the job that it was created to do is generally against Republican ideals. In its first five years, CFPB has reimbursed over $11 billion to a total of 25 million consumers. Payday lenders, banks, and other operators have spent a lot of money on campaigns and lobbying contributions to stem this cash outflow. Republicans see many of the regulations and reimbursements that the organization enforces as hindering to the business of banking. While the group was created to protect the consumer, it often crosses the line into attacking the banks.

In response, Republicans have crafted legislation to weaken the CFPB and give some of the power back to the institutions. Both the bills, described as “weakening” the agency, were pushed by a Republican House and Senate. While there are many regulations that the CFPB enforces that Republicans see as hindering banking transactions, they do believe in the protection of consumers. Therefore, there are banking regulations that Republicans support.

Regulations That Republicans Support

The CFPB slapped a fine of $100 million on Wells Fargo after the company used the customers’ money and personal information to sign them up for online banking services without their consent in 2015. Over the past five years, more than more than 1.5 million sham checking accounts were created by the bank employees and 565,000 credit cards were applied. Many customers discovered the new accounts after they had started accumulating fees.

In this case, the CFPB is facing heat from the Republicans for not regulating Wells Fargo well enough. Many Republicans feel that, rather than catching this earlier on, the organization was focused on regulating perfectly legitimate transactions and keeping bankers from doing profitable business.

Senator Richard Shelby of Alabama, the committee chairman, questioned why CFPB didn’t go after Wells Fargo more swiftly. He stated that the Los Angeles Times first reported on the problems in December 2013 and the Los Angeles city attorney sued the bank in 2015. “This timeline begs the question: Where were the federal regulators during those years?” Shelby asked.

“Why did it take an LA Times reporter to uncover what should have been uncovered by Wells Fargo’s regulators? If there were ever a textbook case where consumers needed protection, this was it. How many millions of unauthorized accounts does it take before the CFPB notices?”

Senator Bob Corker of Tennessee, another committee member, told The Huffington Post after the hearing that he was also concerned about this train of events.

“From what I can tell, the consumer bureau had nothing to do with finding this. I know they came along to vacuum up a fine, if you will. But from what we understand, it was actually the LA Times reporter who uncovered this,” Corker stated.

“Look, I think we should have consumer protection. I always have. I was part of negotiating a bill that would certainly create a consumer protection bureau. I do think having a commission or board members would be a good check and a balance. But I have no indication here – and again, I support their existence – but I have no indication that they had anything whatsoever toward uncovering this.”

“In today’s Banking hearing, Wells Fargo CEO Stumpf admitted that he knew about the fraudulent sales practices back in 2013, but in fact, this was a problem back in 2011. This is a classic example of a ‘Too Big to Fail’ megabank being ‘Too Big to Manage’ and ‘Too Big to Regulate,’” Senator David Vitter of Louisiana said to The Huffington Post. “If the federal regulators had been doing their job all along, we would have ended this scam several years ago.”

Senator Tim Scott of South Carolina said the Wells Fargo incident didn’t change his mind about the need to change CFPB.

“I have yet to see any proof that the CFPB would have prevented the mess we are seeing unravel at Wells Fargo. It remains an unelected and non-transparent board that is only enlarging the bureaucracy,” Scott stated.

ER Anderson, spokesman for Senator Pat Toomey said the senator believes CFPB “was asleep at the switch.” He said Toomey believes Well Fargo employees’ actions were “outrageous and fraudulent,” and the guilty employees and negligent management “should be held accountable.”

“But let’s be clear,” Anderson added. “CFPB did not discover the wrongdoing by Wells Fargo. … In fact Senator Toomey asked the CFPB, other federal regulators, the L.A. City Attorney, and even Wells Fargo about the CFPB’s involvement and none can provide any evidence that the CFPB discovered any wrong doing. Unlike the OCC and the L.A. City Attorney, the CFPB continues to refuse to provide evidence that it played any role in unearthing or cleaning up the mess other than collecting the $100 million fine from the bank ― not a penny of which the CFPB will give to the victims.”

Cordray stated that CFPB was aware of the abuses before the Los Angeles Times. In fact, they first learned about them in 2013. Shelby pushed Cordray on the timeline of investigations, trying to get him to admit that the CFPB essentially glommed onto the work of the LA city attorney and the federal Office of the Comptroller of the Currency, and did not investigate these issues between learning about the issue and when the LA Times brought it into the open. Cordray replied that his agency was doing its own investigation all along. It was never clarified why no action was taken during this time.

Donald Trump on Banking Regulation

President Trump has been vague thus far concerning what his plans are for banking regulation. During his campaign, Trump stated the need to make major changes to Dodd-Frank to free up bank lending.

Post-election, Trump’s website indicated: “The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.” Trump appointed Paul Atkins, a former Republican SEC commissioner and deregulation advocate, to lead these efforts. During his campaign, Trump’s site stated, “It’s time for a 21st Century Glass-Steagall,” in reference to the 1930s law that kept investment and commercial banking separate.

Republicans and Repealing the Dodd-Frank Act

House Republicans presented dozens of bills to rescind most of the Dodd-Frank Act, if not all of it. They have held oversight hearings criticizing regulators for overreach and have declined to approve appointments of top regulators.

Republicans have also fought to stop increases to the budgets of the Securities and Exchange Commission and the Commodities Futures Trading Commission. The crucial changes Republicans are fighting for are included in the Financial CHOICE Act, drafted by the chair of the House Financial Services Committee, Jeb Hensarling. In the month of September, the committee passed that bill mainly along party lines. This act would change the regulations enforced by Dodd-Frank in a many ways, such as minimizing the number of banks under its supervision, finishing the special resolution mechanism, stripping the powers of the Consumer Financial Protection Bureau, requiring comprehensive cost-benefit analysis of anticipated regulations, and repealing the Volcker Rule, which forbids proprietary trading and places severe limits on investments in hedge funds and private equity funds. Hensarling told Morning Consult that Vice President Mike Pence is “very enthusiastic about [the bill],” as are other Trump advisers.